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Many small business owners worry about getting in trouble with the IRS for underpaying their taxes. At the same time, they may not realize that they are missing out on valuable tax credits and paying too much. Find out how working with a professional accountant can help you get eligible tax credits.

Are you sure your company’s tax and payroll tax returns are accurate? Maybe you’re not worried about the IRS suing you for underpaying your tax debt, but rather worried about paying too much. These are scenarios that many small business owners find themselves in, especially with all of the changes to the ERTC over the past two years.

According to a survey by business consultancy Clutch, 93% of small business owners said they were very or somewhat confident in their ability to file their taxes. However, the data also shows that 30% think they pay too much tax, often because they don’t know all the tax credits they could claim.

If this sounds familiar, you might want to consider working with an accounting professional. Here’s why.

Employee retention tax credit challenges abound

Did you benefit from the employee retention tax credit (CERT) in 2020 or 2021? Congress enacted the ERTC in March 2020 as part of the CARES Act to encourage companies to keep workers on the payroll and continue paying group health benefits during the COVID-19 pandemic.

Initially, employers were allowed to claim up to $5,000 per eligible employee in 2020. Congress then extended and expanded the ERTC, allowing employers to claim up to $7,000 per eligible employee for each calendar quarter of 2021. However, as part of the $1.2 trillion infrastructure package passed in November 2021, Congress prematurely ended the ERTC for most employers. For the fourth quarter of 2021, the credit was only available to “recovery start-up businesses”, defined as businesses that began operations on or after February 15, 2020 and had average annual gross revenue of $1 million dollars or less.

Frequent ERTC changes have made credit demand a moving target. The eligibility, calculation and claim for the ERTC could be confusing as it was a payroll tax credit rather than an income tax credit. This meant that eligible employers could claim it on Form 941 and reduce their employment tax deposits by their advance credit or request an ERTC advance from the IRS on Form 7200, Advance Payment of Employment Tax Credits. employer due to COVID-19.

The good news is that even though the ERTC ended early, it’s not too late to claim it for 2020 or 2021. Eligible companies can apply for retroactive reimbursement from the ERC for wages paid during the previous calendar quarters by filing an amended quarterly declaration of social security contributions. To do this, you will need accurate and up-to-date payroll data.

If you need help collecting this information or requesting the ERTC retroactively, an accounting professional can help. For example, ADP recently launched an expanded ERTC offering to help organizations determine if they are eligible for ERTC and guide them through the application process. This consultative conversation can benefit the right clients during tax season with substantial credits if they have the right process to capture them.

Often missed tax credits can impact organizations

The ERTC isn’t the only tax credit that business owners might overlook at tax time. Working with an experienced accounting professional could help reduce your tax burden with other often-missed tax credits, including the following.

Research & Development Tax Credit

The idea of ​​research and development may conjure up labs and white coats, but the research and development (R&D) tax credit isn’t just for science-based businesses. It is available to any company that incurs expenses in an attempt to develop new or improved products, services, processes, software, techniques, or formulas on US soil.

Generally, the credit is worth 6% to 8% of your eligible R&D expenditures. You can apply the credit against your federal income tax payable. However, businesses that have been in business for less than five years and have less than $5 million in gross receipts can choose to apply up to $250,000 of the available credit to their payroll taxes.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit is available to employers who hire people from certain targeted groups, including the long-term unemployed, veterans, ex-criminals, and people receiving Temporary Family Assistance in need (TANF), Supplemental Nutrition Assistance Program (SNAP) or Supplemental Security Income Benefit (SSI).

If you hire employees in one of the applicable categories and employ them for at least 120 hours, you may be eligible for a federal tax credit of up to $9,600 per eligible employee.

Get the support you need

If you’re still going the do-it-yourself route of filing your business taxes, you may be missing out on valuable tax credits without realizing it. It’s an accountant’s job to keep abreast of the tax breaks available and the rules for claiming them, so they can see opportunities for tax savings that you may be missing.

If you’re worried you’ve already missed out on claiming these or other valuable tax credits, it may not be too late. Consider working with an accounting professional to see what credits you may be entitled to and whether you can amend a prior year’s return to claim the credit retroactively.

Did you know?

Your accountant can do more than manage your small business’s books and file your tax returns. If your accountant uses ADP Accountant Connect SMthey will have access to an extensive library of resources to add value to your business, including compensation benchmarking, cash flow management, HR compliance, customer insights, employee reports, and more. industry and company ratings.

Tags: Tax & Payroll Reports HR Administration & Outsourcing Tax Credit Tax Compliance Small Business Articles Business Owner